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Wanted: Coherent Inflation Analysis
Mercifully for a Fed seen by some as willfully blind to a nascent, if not especially acute, inflatio
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When people have excess money, they buy things. If there are not enough things to buy we have inflation. Friedman and Schwartz figured it out but forgot emotion – the multiplier et al – things get better we have more inflation with the same money. They like Trump and feel rich. When they hate his economic failure this summer we will have deflation.
It is not coherent because the numbers are mixed. I saw David Kelly of jpm discuss that lately inflation has been biting “rich folks goods” while most of the last 3 years it has been “poor people’s goods” that inflated. Oer is starting to weaken. The inflation hawks are going to be fighting the last war soon. Even a tariff shock will be a one off and will eventually be a negative demand shock. Trump’s deportation will not be that effective in terms of numbers. It will end up inflicting cruelty on some unfortunate souls.Looking for a surprisingly low fed funds rate by the end of 2026.